Nov 3, 2012

HST vs MSP: why are only some increases revolting?


Vaughn Palmer had an interesting piece in the Vancouver Sun yesterday. In a piece entitled “Dix agenda bows to post-HST reality,” Palmer writes that the NDP, if elected next May, will be forced to keep its tax increases modest, and that this is the legacy of the HST battle that raged after the last election:

All of his [Dix’s] proposed tax increases will be set out in the election platform and they’ll be “modest.”

His reading of the situation, while discouraging to the high expectations of some NDP supporters, is fully in keeping with the way the fight against the harmonized sales tax changed B.C. politics. The anti-HST campaign was in large measure a revolt against the Liberals, for what was widely interpreted as a post-electoral double cross. But it was also a tax revolt, a realization that may have escaped the public-sector unions and others who threw themselves into the campaign with short-sighted enthusiasm.

When Dix says the tax room “is not there any more,” he’s acknowledging a limited public appetite for higher taxes. When he promises “no surprises” on the taxation front, he’s paying his respects to post-HST political reality here in B.C.

At one level, Palmer is right. And his point drives home why some of us at the CCPA were distressed with how the battles against the HST (and the Carbon Tax) were waged. Even though there were clear problems with the design of both taxes (well documented by various CCPA reports), and clear deceit in how the former was introduced, there was also something troubling in the language and tone of how the fights against both taxes were fought, including by progressives. The anti-tax messaging poisoned the well from the perspective of political culture.

Now, as Palmer points out, those who live by the sword will… well, if not die by the sword, at least they are finding themselves severely constrained by the consequences.  (I struggle not to say “we told you so.”)

The take-away from the HST experience for some in the Official Opposition seems to be two-fold:

1)   No surprises. All tax intentions must be spelled out in advance of an election; and

2)   All tax plans must be very modest, raising perhaps a few hundred million dollars, but no more.

The first lesson seems reasonable and well-founded. But the second? Does the HST fight really teach us that British Columbians have no appetite for tax increases, even if they (in contrast to the HST) help to enhance the fairness of the tax system, or if they are tied to goals to which we collectively aspire?

Consider the contrast between the HST debate and the MSP tax. The MSP is the most regressive tax in BC – after the low-income exemption, individuals and households pay the same flat dollar amount regardless of income. It is a head-tax that represents a considerable challenge for modest-income families, and is largely inconsequential to wealthy ones. It is considerably more regressive than the HST or any other sales tax.

Between 2000 and 2013, MSP premiums will have increased by $366 for a single person, and by $732 for a family of three of more – both increases of a dramatic 84%. The BC government now derives more income from MSP premiums than it does from corporate income taxes. According to the 2012 BC Budget, a family of four with a modest annual income of $60,000 will pay more in MSP premiums ($1,536) than it does in provincial personal income taxes ($1,190). And BC is the only province in Canada to charge household medical premiums in this way.

This is a true outrage. Yet, the BC government has managed to steadily increase MSP premiums over the last ten years with nary a whimper of protest. I don’t recall anyone saying in any provincial election campaign that they intended to increase the MSP, and yet after elections the government has done just that.

Likely, people are willing to quietly grumble yet swallow the MSP increases because of its name. We accept this regressive tax increase because its title suggests the money raised is all directed towards the health care system we support, even though in truth it is just another tax that goes into general revenues.

So what would the public response be if, in contrast to both these examples, the government were open and transparent about its plans and challenges, if people were properly consulted, if the tax change contemplated (in contrast to both the HST and MSP) was progressive and fair, and if it were truly tied to programs we care about? I think the lesson is that many British Columbians, under the right conditions, are in fact prepared to consider some significant tax increases. And perhaps our political leaders should be willing to contemplate something a little less modest.

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